This article was firstly published by Seeking Alpha on February 4, 2015
By Sarfaraz A. Khan, Research Asst. Omar Edwardhams
On Tuesday, the Chinese oil companies started showing the impact of lower crude prices when CNOOC (NYSE:CEO), China's biggest offshore oil and gas producer, said that it is going to cut its 2015 capital expenditure budget by 26.1% to 35.4% from last year's estimate of 108.3 billion yuan to between 70 billion and 80 billion yuan, or $11.19 billion and $12.79 billion. The company more than doubled its capital spending during the four years ending 2014. The cut, which was significantly greater than market's expectation of around 8%, was largely due to more than 50% drop in crude oil prices over the last six months.
Like the last few years, CNOOC is going to spend a majority (67%) of its 2015 budget on development of oil and gas properties while most of the remaining will go towards exploration (21%) and production (10%) activities. The company will spend 52% of its budget on its projects in China while the remaining will be invested in other parts of the world. CNOOC is the owner of the Canadian oil producer Nexen which it purchased two years ago for $15.1 billion - the largest foreign acquisition in China's history. Overall, CNOOC generated around a third of its output from outside of China in 2014, as per official estimates.